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Wednesday, April 18, 2012

The Ethiopian Commercial Bank That Was the First African Bank

Many are going to find it hard to
believe that it was an Ethiopian commercial bank that was the first indigenous bank
to be established in Africa. It was created, established, managed and owned by
Ethiopians. The bank’s name: Bank of
Ethiopia. But let’s not get ahead of ourselves, and let’s start from the beginning
of the proud African story entitled “Ethiopia Bank History”.

Bank of Abyssinia

The first Ethiopian bank to open
its doors was the Bank of Abyssinia. It was inaugurated by Emperor Menilik II
on February 16, 1906. Although it was the first one in the long Ethiopia
bank sequence, it was actually a branch of the National Bank of Egypt, a
British bank, and totally managed by them. An agreement had been reached
between Emperor Menilik and the bank officials to introduce modern banking to
Ethiopia and it was given a lot of concessions and leeway.

For example, the Bank of Abyssinia
was guaranteed to no competition from any Ethiopian bank or otherwise for a
concession period of 50 years. And during those fifty years it had the full
right to issue currency notes and coins. In short it had full control on the
country’s currency exchange, both locally and internationally. Add to this the
fact that it kept all profits and was allowed to exchange money for gold and
silver freely meant that it was a sure thing that it would be making a money
hand over fist.

But that wasn’t true. Ethiopians
being new to the banking concept didn’t appreciate the culture of having to
give one’s hard earned money to another for safekeeping. And even when the Bank
of Abyssinia had opened branches in several other Ethiopian cities, it couldn’t
make a profit until 1914 and in 1919, 1920 and from 1924 onwards because it
only increased the cost that was incurred by the bank’s administrative personnel.

After staggering along for a few
more years, the Bank of Abyssinia was officially liquidated in 1931.

Bank of Ethiopia

That same year heralded the birth
of the first Ethiopian national bank, the Bank of Ethiopia. It was established
August 29th, 1931 by official decree shortly after Emperor
Hailesellasie I’s ascent to the throne. It became the first African bank that
was truly African as it was owned and managed by Ethiopia and Ethiopians. It
took over all the activities of the Bank of Abyssinia and was performing
strongly right up to the Italian invasion in 1935.

Sadly very little has been
documented about this bank, and a lot needs to be done before this proud
Ethiopian and African history is forgotten.

Foreign Banks

With the Italian troops came Italian
banks, and with their withdrawal in 1941 came another foreign bank, Barclays
Bank that was to cater to the British troops that had helped liberate Ethiopia.

State Bank of Ethiopia

The second Ethiopian national
bank started its work on April 15th, 1945. It was called the State
Bank of Ethiopia. This bank also had to cease to exist as it was deemed necessary
to split the functions of the bank.

Commercial Bank of Ethiopia, Addis Ababa

Commercial Bank of Ethiopia, National Bank of Ethiopia et al

It was therefore with the
introduction of the 1963 Ethiopian Monetary Law that the first Ethiopian commercial
bank was established: Commercial Bank of Ethiopia. The role of a central bank
was given to the National Bank of Ethiopia. These two banks exist to date and
have been joined by a multitude of private and government owned banks.